(Bloomberg) – Baidu Inc. (BIDU) posted its biggest sales decline in more than two years after China’s economic slump undermined its push for generative AI.
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Sales for the three months ended September fell 3% to 33.6 billion yuan ($4.6 billion), in line with analyst expectations. The net result was 7.6 billion yuan. The stock fell more than 2% in pre-market trading in the US.
The Chinese internet searcher has a lot to prove with its AI-first growth strategy, which has delivered disappointing returns so far. The company hopes its Ernie artificial intelligence model – which now handles 1.5 billion daily searches – can be the game-changer for businesses like search and cloud, but it will take some time before monetization fully takes off comes. The Ernie Bot has fallen behind ByteDance Ltd. .’s Doubao in China is being used, while its core business is losing focus to newer social platforms such as Xiaohongshu and Douyin.
The broader AI efforts include autonomous vehicles, an arena in which Baidu is considered a pioneer. On Thursday, Baidu said it has started operating the latest generation of Apollo Go driverless taxis in several cities, pushing the cheaper model past the testing phase. Fully self-driving vehicles – vehicles without safety personnel behind the wheel – now account for 70% of Baidu’s robotaxi rides across the country, the report said.
Baidu is among the companies most vulnerable to China’s downturn, as its top advertisers span sectors from automakers to real estate. Rivals Tencent Holdings Ltd. and Alibaba Group Holding Ltd. said they saw some improvement in the broader economy last week after posting mixed results, although neither gave a forecast on when a recovery might occur.
Despite a head start in China’s AI frenzy, Baidu is struggling to maintain its leadership. Besides no longer having the most popular AI chatbot in the country, the company is facing an all-out price war between AI infrastructure providers to entice more developers and startups as customers.
“Despite the short-term pressures, we remain steadfast in our AI-focused strategy and are confident in our long-term trajectory,” founder Robin Li said in a statement.
The billionaire unveiled a range of tools and add-ons for Ernie users at his company’s annual product event in Shanghai last week, although he failed to launch a more powerful version of the AI model. He called AI agents — or chatbots customized to perform tasks on behalf of the user — the centerpiece of Baidu’s strategy as the company looks to broaden its content offering in search.
